Is extreme poverty really being eradicated?

A silver lining to 2016

Matt Pomroy

December 14, 2016

14December2016

Matt Pomroy

Here’s a statistic that illustrates how the world has changed in the last 200 years. Had you been born in 1820 there’s a 94 percent chance that you’d be extremely poor, with just six percent of the world’s population not living in extreme poverty. However, those considered extremely poor in 2016 constitute around just 9.6 percent.

The wealth improvement since 1820 is even more notable when you consider that the global population increased seven-fold over that same period. The assumption might be that this would result in less income for everyone, but the opposite happened. And it’s largely because of industrialisation and globalisation.

As countries industrialised, increased productivity saw economies grow and poverty decline. By 1950 three-quarters of the world were still living in extreme poverty, which is a significant decrease but still a huge number. So for people who think the Fifties were the good ol’ days, well, they were terrible for three out of four people.

Since the post-WW2 era, the movement of goods, people and capital has increased dramatically, not only from developing to developed nations, but also within developing countries themselves. A UN report showed that in 1980, global trade among developing countries was less than 10 percent of the total but today is just over 25 percent.

This shows that although international aid has helped many developing countries in times of disaster and famine, the increase in trade has had a longer-term effect. The resulting revenues have allowed governments to invest in literacy programmes, basic healthcare — such as vaccinations — and in roads and transport that give people better access to jobs to work their way out of poverty.

In terms of actual figures, there were 2.2 billion people living in extreme poverty in 1970, and by 2015 that figure had fallen to 705 million. It’s still a huge number, largely concentrated in Sub-Saharan Africa and parts of South-East Asia, but massive progress is being made. Even in Sub-Saharan Africa, extreme poverty has declined to 35.2 percent in 2015, compared to 42.6 percent in 2012.

Jim Yong Kim, World Bank Group President, said: “This is the best story in the world today. These projections show us that we are the first generation in human history that can end extreme poverty.” The target date for that goal is 2030.

But there are caveats to this news. Extreme poverty is defined as living at an income level of at or below 1.9 “international dollars” per day. These are adjusted for price differences between countries and inflation over time, but the fact remains that it’s very little money on which to survive.Secondly, nearly 60 percent of the world’s extremely poor people live in India, Nigeria, China, Bangladesh and the DRC.

And since the start of the 1980s, China’s poverty rate has fallen from 85 percent to 15.9 percent (accounting for 600 million people), which skews the figures. Excluding China, global poverty fell only 10 percent in that time.

And while the global economy has grown sevenfold since 1950, the disparity between rich and poor has accelerated to the point where the world’s top 80 billionaires now hold wealth equal to the bottom 50 percent of humanity. So the free-market capitalism that has lifted the very poorest out of extreme poverty is also a huge contributor to the gulf between rich and poor.

It’s also worth noting that, although extreme poverty has fallen, those people have only ascended one rung from extreme poverty into a less-harsh form of poverty, and almost half the world — over three billion people — lives on less than $2.50 a day.

A final sad irony is that industrialisation, the best hope for countries wishing to improve the lot of its citizens, is also the biggest contributor to climate change, which the poorest countries are most ill-equipped to deal with.

It’s easy to despair about these significant challenges ahead. But when people talk about the “good old days” or making places “great again”, we should remind them that although 2016 may not go down as humanity’s finest year (and we’re already viewing 2017 with narrow-eyed suspicion) we are taking huge steps towards making the world a better place for millions of the most vulnerable people.